Most Read

The review period for the MSCI May QCIR started last week and there were ad hoc changes to the S&P/ASX family and the KOSDAQ 150 Index (KOSDQ150 INDEX).
The end of the coming week will mark the end of the review period for the upcoming rebalances for a bunch of indices with implementation scheduled in May and June.
There was inflow to the Tracker Fund of Hong Kong Ltd (2800 HK) ETF for another week.

Yuexiu Property (123 HK): US$1.1bn Dilutive and Unnecessary Rights Issue

Yuexiu Property (123 HK) will raise US$1.1bn through a rights offering – 30 rights shares for every 100 existing shares. The subscription price is HK$9.00, a 23.3% discount to TERP.
As Yuexiu is in no danger of breaching the three red lines, the rights issue is an opportunistic play on capitalising on the strong share price run.
Rights shares will be entitled to the final and special dividend announced on 15 March. Shares go ex-rights on 2 May and the rights start trading on 15 May.

Yuexiu Property (123 HK) Rights Offering

On Thursday morning, Yuexiu Property (123 HK) halted trading in its shares and then later in the day announced a rights offering. Shares fell hard but gained back a little.
The rights offering lowers BVPS by about 11.3% so the current price is “about right” for the fundamentals if the price the day before the news was right.
There are, however, flow dynamics which are of interest. There almost always are.

Another Reason To Like China Mobile (941 HK)

In March, the HK Secretary for Financial Services announced a waiver of stamp duty on dual counter trading market making. In November, the Govt of HK gazetted a bill.
HKEX launched plans in December. 9 large HK names announced in March they’d apply (Tencent, Kuaishou, Geely, BOC, Anta, AIA, China Resources Beer, Bidu, HKEX). Six more in April.
All the announcements are similar. But one on 21 April caught my eye because it is a big H/A with strong southbound support. That’s China Mobile (941 HK).

Overlooked Trading Angle in K-New Deal Rebalancing Event: Two LONG SHORT Pairs to Watch

Two pairs of constituent changes marked in squares in INTERNET and GAME may offer meaningful trading opportunities: Seojin System IN / Ahnlab OUT and Com2us IN / Doubleugames OUT.
Along with TIGER ETF, stealth index funds follow these indices. So, constituent changes in INTERNET and GAME create a flow impact of 0.3~0.6x DTV, even not in the Top 3.
Also, INTERNET and GAME have less passive flow impact degradation risk due to momentum trading flows compared to BATTERY and BIO.

Nationalization of Lithium Industry in Chile – Impact on Korean Rechargeable Batteries Value Chain

On 20 April, Chile’s government announced that it will be nationalizing the country’s lithium industry. Chile is the second largest producer of lithium in the world.
The nationalization of the lithium industry in Chile will likely have a long-term negative impact on the rechargeable batteries related companies in Korea.
This is mainly due to greater challenges of getting access to lithium at more affordable prices.

Last Week in Event SPACE: Yamada Denki, Genting, HKBN, Toyo Construction

Yamada Denki (9831 JP) lowering the March 2023 div to ¥12/share vs ¥18/share last year was just weird. And bodes badly. We need a lightbulb moment for a lightbulb dilemma.
Genting Bhd (GENT MK)‘s implied stub and simple ratio (GENT/ Genting Singapore (GENS SP)) are currently at muti-year trough levels.
Buy Toyo Construction (1890 JP) <¥970. The proposed dividend could be in danger should YFO spill the board; but spilling the board to get better governance is a good thing.

Merger Arb Mondays (24 Apr) – AAG Energy, Jiangnan, HKBN, Healius, Lian Beng, Toyo

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – 111 Inc (YI US), Estia Health (EHE AU), Aag Energy Holdings (2686 HK), United Malt Group Ltd (UMG AU), Origin Energy (ORG AU), Toshiba Corp (6502 JP).
Lowest spreads – Healius (HLS AU), Liontown Resources (LTR AU), Lian Beng (LBG SP), Golden Energy & Resources (GER SP), HKBN Ltd (1310 HK), Mincor Resources NL (MCR AU).

Nvidia, TSMC, ASML Trading Monitor – TSMC & ASML Results Indicate Cycle Bottom 2Q23E for Leaders

By Vincent Fernando, CFA

TSMC and ASML reported results last week, with both companies beating consensus earnings expectations.
TSMC and ASML both expect their historically high margins to persist and have both shown a major decline in inventory levels.
TSMC expects utilization to bottom in 2Q23E and improve thereafter; which we believe is strong indication of the cycle bottoming for leaders. TSMC however sees the overall industry taking longer.

Las Vegas Sands: Starting a Run as Macau Recovery Gains Speed. Up 23% YTD.

By Howard J Klein

LVS just reported 1Q23 results showing a surging recovery of GGR and daily arrivals in Macau driving gains in revenue and profit profile.
Labor shortages that have limited availability of LVS’ 12,000 rooms are beginning to subside. Golden Week just ahead expected to reach +90% room occupancy.
Stock has moved over 20% since our buy call at $53. Our PT is raised to $80.

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Apr 23

Most Read: Lasertec Corp, JD Health, Bellevue Gold, Qisda Corp, Kotak Mahindra Bank, Sun Kwang, Oci Co Ltd, Dongwon Industries, TS Corporation, Tong Hsing Electronic Industries Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Index Rebalance & ETF Flow Recap: Nikkei225, KOSDAQ150, KT Corp
Hang Seng Index Rebalance Preview: A Year Later Than Planned – 80 Members at Last?
S&P/ASX Adhoc Index Rebalance: SVW in ASX100, BGL in ASX200
Yuanta/P-Shares Taiwan Dividend Plus ETF: June Rebalance Preview
Index Rebalance & ETF Flow Recap: HSI, S&P/ASX, KOSDAQ150, TAMSCI, Kotak Mahindra Bank
KOSDAQ150 Ad Hoc Index Rebalance: Sun Kwang (003100) To Replace SK Oceanplant (100090)
Update on the Trading Opportunities Post OCI Spin-Off
Aggressive Shorting on Dongwon Industries, Which Has Not Been Noticed as a K200 Deletion
Korea Small Cap Gem #21: TS Corp – Addicted to Sugar
Index Rebalance & ETF Flow Recap: MSCI STD, Yuanta Div+, ZJLD, Anta

Index Rebalance & ETF Flow Recap: Nikkei225, KOSDAQ150, KT Corp

The March rebalances of the NIFTY indices and the Nikkei 225 (NKY INDEX) were implemented last week. Plus some ad hoc rebalances for the KOSPI2 INDEX and KOSDQ150 INDEX.
A quieter week coming up with multiple market holidays across markets. We also near the start of the review period for the MSCI May QCIR.
There were inflows to Tracker Fund of Hong Kong Ltd (2800 HK) and iShares FTSE/Xinhua A50 China (2823 HK) during the week while there were outflows from some Korea ETFs.

Hang Seng Index Rebalance Preview: A Year Later Than Planned – 80 Members at Last?

With no changes made at the March rebalance, we are still stuck at 76 index constituents. And it’s been a year later than originally planned to reach 80 index constituents.
We list 10 potential inclusions in June. Adding all 10 stocks will lead to around 5% one-way turnover, so there could be a mix of larger and smaller stocks added.
There will be at least 1x ADV to trade on nearly all inclusions. Short interest is over 4% of float on some stocks and there has been a recent jump.

S&P/ASX Adhoc Index Rebalance: SVW in ASX100, BGL in ASX200

Shareholders have approved OZ Minerals Ltd (OZL AU)‘s acquisition by BHP Group Ltd (BHP AU) and OZL is expected to stop trading after the close on 18 April.
OZ Minerals Ltd (OZL AU) will be replaced by Bellevue Gold (BGL AU) in the S&P/ASX 200 (AS51 INDEX) and by Seven Group Holdings (SVW AU) in the S&P/ASX 100.
There has been huge short covering on Seven Group Holdings (SVW AU) and Bellevue Gold (BGL AU) over the last few months.

Yuanta/P-Shares Taiwan Dividend Plus ETF: June Rebalance Preview

Using data from the close on 19 April, there could be 5 changes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in June.
There will also be capping and funding flows that will lead to a one-way turnover of 13.6% and a one-way trade of US$885m.
There are 10 stocks with at least 3 days ADV to trade from passive trackers and another 10 stocks that have at least 1 day ADV to trade.

Index Rebalance & ETF Flow Recap: HSI, S&P/ASX, KOSDAQ150, TAMSCI, Kotak Mahindra Bank

The review period for the MSCI May QCIR starts on Monday. The most ~~changes~~ inclusions by far are expected to be in China.
There will be an ad hoc change for the S&P/ASX 100 Index, S&P/ASX 200 (AS51 INDEX) and KOSDAQ 150 Index (KOSDQ150 INDEX) at the close on 18 April.
After a period of sustained outflows, there were some inflows to the IShares Core MSCI Asia Ex Japan ETF (3010 HK) during the week.

KOSDAQ150 Ad Hoc Index Rebalance: Sun Kwang (003100) To Replace SK Oceanplant (100090)

Following SK Oceanplant (100090 KS) moving from the KOSDAQ to KOSPI Market, the stock will be deleted from the KOSDAQ 150 Index and replaced with Sun Kwang (003100 KS).
The change will be implemented at the close on 18 April and passive trackers will need to trade over 1x ADV on both stocks.
Sun Kwang (003100 KS) was a high probability index inclusion in June, so this brings forward the inclusion by a couple of months.

Update on the Trading Opportunities Post OCI Spin-Off

The Korea Exchange announced today (20 April) the change in index constituents and major dates for the Oci Co Ltd (010060 KS) spin-off.
Oci Co Ltd (010060 KS)’s shares will be suspended from trading from 27 April to 26 May 2023.
After the spin-off and relisting of holdco/opco shares, we believe that there is a greater probability of OCI Co (opco) shares outperforming OCI Holdings (holdco).

Aggressive Shorting on Dongwon Industries, Which Has Not Been Noticed as a K200 Deletion

Dongwon Industries’ float rate is less than 10% (1 – 63.15% – 27.65% = 9.20%), which makes it ineligible for KOSPI 200. KRX will reflect this in the June review.
The passive outflow size due to K200 deletion is expected to be about 50 billion won, which will cause an impact of about 28x ADTV.
Considering this deletion has not been sufficiently exposed in the market, the actual price impact may be even more significant and preemptive.

Korea Small Cap Gem #21: TS Corp – Addicted to Sugar

Ts Corporation (001790 KS) is the 21st company in our Korea Small Cap Gems series.
TS Corp is one of the largest sugar refining companies in Korea. Rising raw sugar prices generally have a positive impact on TS Corp’s sales and profits.
TS Corp owns very valuable real estate assets that are much larger than its current market cap (299 billion won).

Index Rebalance & ETF Flow Recap: MSCI STD, Yuanta Div+, ZJLD, Anta

The review period for the MSCI May QCIR started last week and there were ad hoc changes to the S&P/ASX family and the KOSDAQ 150 Index (KOSDQ150 INDEX).
The end of the coming week will mark the end of the review period for the upcoming rebalances for a bunch of indices with implementation scheduled in May and June.
There was inflow to the Tracker Fund of Hong Kong Ltd (2800 HK) ETF for another week.

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Apr 22

Most Read: Bellevue Gold, Qisda Corp, Compeq Manufacturing, LG Chem Ltd, Oci Co Ltd, Yuexiu Property, Toshiba Corp, Meituan, Essential Metals, Dongwon Industries and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

S&P/ASX Adhoc Index Rebalance: SVW in ASX100, BGL in ASX200
Yuanta/P-Shares Taiwan Dividend Plus ETF: June Rebalance Preview
Quiddity Leaderboard TWSE Div+ Jun 23: Take the Win on YFY Now
Flow Trading Opportunities on LG Chem with Potential Inclusion in Battery ETFs
Update on the Trading Opportunities Post OCI Spin-Off
Yuexiu Property (123 HK): US$1.1bn Dilutive and Unnecessary Rights Issue
Toshiba – HDD Business Risk
[Meituan (3690 HK) Rating Change]: Meituan’s Counterstrike Is Effective, Upgrade to BUY
Essential Metals In Limbo As MinRes Lurks
Aggressive Shorting on Dongwon Industries, Which Has Not Been Noticed as a K200 Deletion

S&P/ASX Adhoc Index Rebalance: SVW in ASX100, BGL in ASX200

Shareholders have approved OZ Minerals Ltd (OZL AU)‘s acquisition by BHP Group Ltd (BHP AU) and OZL is expected to stop trading after the close on 18 April.
OZ Minerals Ltd (OZL AU) will be replaced by Bellevue Gold (BGL AU) in the S&P/ASX 200 (AS51 INDEX) and by Seven Group Holdings (SVW AU) in the S&P/ASX 100.
There has been huge short covering on Seven Group Holdings (SVW AU) and Bellevue Gold (BGL AU) over the last few months.

Yuanta/P-Shares Taiwan Dividend Plus ETF: June Rebalance Preview

Using data from the close on 19 April, there could be 5 changes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in June.
There will also be capping and funding flows that will lead to a one-way turnover of 13.6% and a one-way trade of US$885m.
There are 10 stocks with at least 3 days ADV to trade from passive trackers and another 10 stocks that have at least 1 day ADV to trade.

Quiddity Leaderboard TWSE Div+ Jun 23: Take the Win on YFY Now

By Janaghan Jeyakumar, CFA

In this insight, we take look at Quiddity’s estimations for index changes and capping flows for the Taiwan Div+ index for the June 2023 review.
I currently see 4 ADDs/DELs but there are several names close to the border and expectations could change before the base date as prices move around.
My latest estimation for one-way flow is around US$778mn which translates to a turnover of approximately 12%.

Flow Trading Opportunities on LG Chem with Potential Inclusion in Battery ETFs

We now have an environment that allows Korea’s battery ETFs to include LG Chem in upcoming reviews. KODEX is in June, and TIGER is in July.
If LG Chem is included in each review, the expected one-day inflow is at 0.7-0.8x DTV, which can lead to a price impact similar to that of SKIET in 2021.
We should consider setups targeting this, including Long Short, which utilizes LG Energy Solution or LG Corp as a hedge.

Update on the Trading Opportunities Post OCI Spin-Off

The Korea Exchange announced today (20 April) the change in index constituents and major dates for the Oci Co Ltd (010060 KS) spin-off.
Oci Co Ltd (010060 KS)’s shares will be suspended from trading from 27 April to 26 May 2023.
After the spin-off and relisting of holdco/opco shares, we believe that there is a greater probability of OCI Co (opco) shares outperforming OCI Holdings (holdco).

Yuexiu Property (123 HK): US$1.1bn Dilutive and Unnecessary Rights Issue

Yuexiu Property (123 HK) will raise US$1.1bn through a rights offering – 30 rights shares for every 100 existing shares. The subscription price is HK$9.00, a 23.3% discount to TERP.
As Yuexiu is in no danger of breaching the three red lines, the rights issue is an opportunistic play on capitalising on the strong share price run.
Rights shares will be entitled to the final and special dividend announced on 15 March. Shares go ex-rights on 2 May and the rights start trading on 15 May.

Toshiba – HDD Business Risk

By Mio Kato

We have been tracking Toshiba’s rapidly deteriorating HDD business over the last few quarters.
Recent trends raise further concerns about the long-term viability of the business.
In particular, visibility remains low on a strong recovery in demand and until that occurs the possibility of a YoY deterioration remains high.

[Meituan (3690 HK) Rating Change]: Meituan’s Counterstrike Is Effective, Upgrade to BUY

By Shawn Yang

We upgrade Meituan to BUY as (1) its recent subsidy campaign vs. Douyin has achieved some successes, and (2) its food delivery margin may have further upside;
We suggest that Douyin’s local service market share reaches a high level, especially when compared with its eCommerce market share;
Our C1Q23 top/bottom line are in-line/25.5% vs. cons. Raise TP to HK$ 165, which implies 4x PS/12x PE/1x PS for delivery/in-store/new initiatives.

Essential Metals In Limbo As MinRes Lurks

On the 9th Jan, lithium player Essential Metals (ESS AU) entered into a Scheme with Tianqi Lithium JV, comprising Tianqi Lithium (9696 HK) (51%) and IGO Ltd (IGO AU) (49%).
Shortly before the 20 April Scheme Meeting, Mineral Resources (MIN AU) announced a 19.55% stake.
A Scheme failure was expected. And 68.47% voted against the transaction. The question is – now what?

Aggressive Shorting on Dongwon Industries, Which Has Not Been Noticed as a K200 Deletion

Dongwon Industries’ float rate is less than 10% (1 – 63.15% – 27.65% = 9.20%), which makes it ineligible for KOSPI 200. KRX will reflect this in the June review.
The passive outflow size due to K200 deletion is expected to be about 50 billion won, which will cause an impact of about 28x ADTV.
Considering this deletion has not been sufficiently exposed in the market, the actual price impact may be even more significant and preemptive.

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Apr 21

Most Read: Qisda Corp, Rakuten Bank , Compeq Manufacturing, Yuexiu Property, Seven & I Holdings, LG Chem Ltd, Tong Hsing Electronic Industries Ltd, Silk Laser Australia and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Yuanta/P-Shares Taiwan Dividend Plus ETF: June Rebalance Preview
Rakuten Bank IPO Trading – Ample Upside
Rakuten Bank (5838) IPO – Post-IPO Trading Volume Decay and RB’s Place Among Banks (Part 3)
Quiddity Leaderboard TWSE Div+ Jun 23: Take the Win on YFY Now
Big Yuexiu Property (123 HK) Rights Issue – 3 Capital Actions from Here to Mid-June
Seven & I: Founder’s Death Fuels Value Act’s Activism, Angers The Board, Reduces Short Thesis Risk
Flow Trading Opportunities on LG Chem with Potential Inclusion in Battery ETFs
Yuexiu Property (123 HK): US$1.1bn Dilutive and Unnecessary Rights Issue
Quiddity Leaderboard TWSE50/100 Jun 23: Tong Hsing Is a Div+ DEL as It Stands
Wesfarmer’s Non-Binding Offer For Silk

Yuanta/P-Shares Taiwan Dividend Plus ETF: June Rebalance Preview

Using data from the close on 19 April, there could be 5 changes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in June.
There will also be capping and funding flows that will lead to a one-way turnover of 13.6% and a one-way trade of US$885m.
There are 10 stocks with at least 3 days ADV to trade from passive trackers and another 10 stocks that have at least 1 day ADV to trade.

Rakuten Bank IPO Trading – Ample Upside

Rakuten Bank (5838 JP), the online banking arm of Rakuten (4755 JP), raised around US$630m in its Japan IPO.
RB is the largest internet bank in Japan, by number of accounts. As of Dec 22, it had 13.3m deposit accounts with a total deposit base of JPY8.8tn.
In our earlier notes, we have looked at various aspects of the deal. In this note, we talk about the deal dynamics and trading updates.

Rakuten Bank (5838) IPO – Post-IPO Trading Volume Decay and RB’s Place Among Banks (Part 3)

To look at the Rakuten Bank (5838 JP) IPO and how trading and pricing may occur, some are looking at SBI Sumishin Net Bank (7163 JP).
To understand the movements of SBI Sumishin Net Bank, it may help to look at other IPOs in Japan and how they trade post-IPO.
I looked at the last 200+ IPOs in Japan to understand volume decay and price evolution. It leads to suggestions for investors regarding Rakuten Bank.

Quiddity Leaderboard TWSE Div+ Jun 23: Take the Win on YFY Now

By Janaghan Jeyakumar, CFA

In this insight, we take look at Quiddity’s estimations for index changes and capping flows for the Taiwan Div+ index for the June 2023 review.
I currently see 4 ADDs/DELs but there are several names close to the border and expectations could change before the base date as prices move around.
My latest estimation for one-way flow is around US$778mn which translates to a turnover of approximately 12%.

Big Yuexiu Property (123 HK) Rights Issue – 3 Capital Actions from Here to Mid-June

After being halted this morning before the start of trade, post-close, Yuexiu Property (123 HK) announced a fully-underwritten Rights Offering.
The Rights Offering intends to raise HK$8.36bn issuing 30 Rights for every 100 Shares held, at a subscription price of HK$9.00, a 23.3% discount to TERP.
This will take a moderately-levered property/services/leaseco and add more capital to it. Not terribly bullish. Looks opportunistic. And one has to look through 3 capital actions to see dividends ahead.

Seven & I: Founder’s Death Fuels Value Act’s Activism, Angers The Board, Reduces Short Thesis Risk

By Oshadhi Kumarasiri

Value Act’s investor activism campaign picked up steam following the death of Seven & I Holdings (3382 JP) founder.
The board of Seven & I may have been aggravated by Value Act’s unreasonable demands and timing, leading to their first angry response in over two years.
The damaged relationship between Seven & I and Value Act reduces the upside risk to our short thesis from disposal of underperforming businesses.

Flow Trading Opportunities on LG Chem with Potential Inclusion in Battery ETFs

We now have an environment that allows Korea’s battery ETFs to include LG Chem in upcoming reviews. KODEX is in June, and TIGER is in July.
If LG Chem is included in each review, the expected one-day inflow is at 0.7-0.8x DTV, which can lead to a price impact similar to that of SKIET in 2021.
We should consider setups targeting this, including Long Short, which utilizes LG Energy Solution or LG Corp as a hedge.

Yuexiu Property (123 HK): US$1.1bn Dilutive and Unnecessary Rights Issue

Yuexiu Property (123 HK) will raise US$1.1bn through a rights offering – 30 rights shares for every 100 existing shares. The subscription price is HK$9.00, a 23.3% discount to TERP.
As Yuexiu is in no danger of breaching the three red lines, the rights issue is an opportunistic play on capitalising on the strong share price run.
Rights shares will be entitled to the final and special dividend announced on 15 March. Shares go ex-rights on 2 May and the rights start trading on 15 May.

Quiddity Leaderboard TWSE50/100 Jun 23: Tong Hsing Is a Div+ DEL as It Stands

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the names leading the race to become ADDs/DELs for the T50 and T100 Indices for the June 2023 Rebalance.
At present, there are no ADDs/DELs expected for the T50 index but there could be a couple of changes for the T100 index.
With roughly a month remaining to the base date, there could be more changes to our expectations in the run up to the June 2023 rebalance.

Wesfarmer’s Non-Binding Offer For Silk

Wesfarmers Ltd (WES AU) has made a non-binding indicative Offer, by way of a Scheme, for Silk Laser Australia (SLA AU), an operator of specialist clinic networks across Australia.
The Offer Price of $3.15/share is a decent 30.2% premium to last close. Wilson Asset Management, with 9.3% of shares out, is supportive.
Wesfarmers has been granted 30 days to undertake due diligence on an exclusive basis.

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Apr 20

Most Read: KT Corp Sp Adr, ZJLD Group, Bh Co Ltd, Yamada Denki, HKBN Ltd, Qisda Corp, Anta Sports Products, Rakuten Bank , Mankind Pharma and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Targeting the Widening of KT Corp ADR Premium Amid MSCI Inclusion
ZJLD Group (6979 HK): Index Inclusion Possibility & Timelines
An Exposed Target for Flow Trading on KQ150 Ad-Hoc Change by BH’s KOSPI Transfer Listing
Yamada Denki (9831) Buyback Almost Done and Odd Dividend “Cut”, and a Lightbulb Dilemma
If HKBN Gets Taken Out, Who’s Next?
Yuanta/P-Shares Taiwan Dividend Plus ETF: June Rebalance Preview
Anta Sports (2020 HK): Our View After Placement
Rakuten Bank IPO Trading – Ample Upside
Rakuten Bank IPO: Trading Debut
Mankind Pharma IPO – Quality Name but Might Not Have a Whole Lot of Upside

Targeting the Widening of KT Corp ADR Premium Amid MSCI Inclusion

We should expect significant changes in KT’s ADR premium approaching the implementation date as foreign institutions leading the passive flow for MSCI Korea constituents have typically preferred ADRs.
Looking at the previous two occasions, the ADR disparity widened from the midpoint of the review period. And this trend continued for a while after the implementation.
Although KT’s ADR disparity has not yet significantly expanded, we may witness a similar pattern this time as well, given that it has been continuously moving in the premium recently.

ZJLD Group (6979 HK): Index Inclusion Possibility & Timelines

ZJLD Group (ZJLD HK) is looking to raise between US$775m-US$933m (including the oversubscription option) in its IPO by selling 564.3m shares at a price range of HK$10.78-HK$12.98/share.
ZJLD Group (ZJLD HK) will not get Fast Entry to any indices but should be added to the HSCI and Stock Connect in September.
Peer performance has not been great this year and that could weigh on the ZJLD Group (ZJLD HK) listing.

An Exposed Target for Flow Trading on KQ150 Ad-Hoc Change by BH’s KOSPI Transfer Listing

BH Co Ltd (090460 KS) will likely complete the transfer listing by early May, suggesting an ad-hoc change may occur before the regular rebalancing of the KOSDAQ 150 in June.
BH’s GICS sector is INFORMATION TECHNOLOGY. It means the top reserved issue at the previous review gets to replace BH. At this point, it will be HFR Inc (230240 KS).
We should build up a Long position on HFR right after KRX approves BH’s transfer and then close it on the next trading day after the KQ150 corporate action announcement.

Yamada Denki (9831) Buyback Almost Done and Odd Dividend “Cut”, and a Lightbulb Dilemma

In May 2022, Yamada Denki (9831 JP) announced a very large buyback. GINORMOUS – in fact – at 23.9% of shares out ex-Treasury if maximum shares were bought.
So far, YDH is 83.5% through, and at the recent pace, they will end it 8 May having bought 183-184mm shares (21.9% of TSO) spending 86.6% of funds allocated.
That’s why the announcement lowering the March 2023 div to ¥12/share vs ¥18/share last year was just weird. And bodes badly. We need a lightbulb moment for a lightbulb dilemma.

If HKBN Gets Taken Out, Who’s Next?

HKBN Ltd (1310 HK) spiked 12.3% yesterday in response to media reports (like this one) that China Mobile (941 HK) was running a ruler over the company.
This follows Bloomberg reports last month and in May last year, that I Square’s HGC Global Communications and numerous PE outfits were kicking tyres of the Hong Kong broadband play.
Over the weekend, Hong Kong’s security chief was quoted as saying “the internet could become a major loophole when maintaining national security“. HKT (6823 HK) is a potential privatisation candidate.

Yuanta/P-Shares Taiwan Dividend Plus ETF: June Rebalance Preview

Using data from the close on 19 April, there could be 5 changes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in June.
There will also be capping and funding flows that will lead to a one-way turnover of 13.6% and a one-way trade of US$885m.
There are 10 stocks with at least 3 days ADV to trade from passive trackers and another 10 stocks that have at least 1 day ADV to trade.

Anta Sports (2020 HK): Our View After Placement

By Osbert Tang, CFA

The new share placement of Anta Sports Products (2020 HK) has caught the market by surprise, but we think long-term story for the company should not be affected.
With proceeds to be used for repayment of outstanding debts, expansion in China and pursuing SE Asia markets, we should not overlook the benefits to be generated.
An IPO of Amer Sports is clearly brewing and this represents an important catalyst. Anta’s 26.4x and 20.9x FY23 and FY24 PERs do not look stretched relative to earnings growth.

Rakuten Bank IPO Trading – Ample Upside

Rakuten Bank (5838 JP), the online banking arm of Rakuten (4755 JP), raised around US$630m in its Japan IPO.
RB is the largest internet bank in Japan, by number of accounts. As of Dec 22, it had 13.3m deposit accounts with a total deposit base of JPY8.8tn.
In our earlier notes, we have looked at various aspects of the deal. In this note, we talk about the deal dynamics and trading updates.

Rakuten Bank IPO: Trading Debut

Rakuten Bank (5838 JP) priced its IPO at JPY1,400 per share to raise gross proceeds of US$620 million. The shares will start trading on 21 April.
We previously discussed the IPO in Rakuten Bank IPO: The Investment Case, Rakuten Bank Vs SBI Sumishin Net Bank and Rakuten Bank IPO: New Price Range Is a Steal.
Peers have re-rated and our valuation analysis points to a fair value of around JPY1,900 per share, 36% above the IPO price. Therefore, the IPO price remains attractive.

Mankind Pharma IPO – Quality Name but Might Not Have a Whole Lot of Upside

Mankind Pharma (MP) is looking to raise up to US$527m in its upcoming India IPO.
MP is a pharmaceutical company engaged in developing, manufacturing and marketing a range of pharmaceutical formulations across various acute and chronic therapeutic areas, as well as several consumer healthcare products
We have looked at various aspects of the deal in our earlier notes. In this note, we talk about the implied valuations.

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Apr 19

Most Read: Ecopro Co Ltd, Nitori Holdings, Anta Sports Products, Alibaba Group, HKBN Ltd, Keppel Infrastructure Trust, Taiwan Semiconductor (TSMC), KT Corp Sp Adr, Toyo Construction, Yamada Denki and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

MSCI May 2023 QCIR: Potential Changes & Things to Watch as Review Period Commences
Nikkei 225 Sep 2023 Rebalance Gets Interestinger – Possible Fast Retailing Cap and Zozo Stretch
Anta Sports (2020 HK) Placement: Limited Passive Inflows
Alibaba (9988 HK): “Department One” in Reorganization
HKBN (1310 HK): China Mobile Is the Latest to Show Interest
Keppel Infrastructure Trust Placement – Very Well Flagged, Should Expect Some Short Covering
TSMC: Crowded Trade?
Targeting the Widening of KT Corp ADR Premium Amid MSCI Inclusion
YFO Goes Hard for Board Spill – Independents AND Executives
Yamada Denki (9831) Buyback Almost Done and Odd Dividend “Cut”, and a Lightbulb Dilemma

MSCI May 2023 QCIR: Potential Changes & Things to Watch as Review Period Commences

The review period for the price cutoff for the MSCI May Quarterly Comprehensive Index Review (QCIR) starts today. MSCI should choose a day from this week to compute market cap.
The most changes (especially adds) are expected in mainland China following an expansion of the universe for inclusion of stocks in Northbound Stock Connect.
There are stocks in India where there will be FIF changes triggering large flows and there are things to watch on some stocks in Korea and China.

Nikkei 225 Sep 2023 Rebalance Gets Interestinger – Possible Fast Retailing Cap and Zozo Stretch

With 3.5 months left in the dataset, the data is pretty close to settled. The interesting bits are elsewhere. There are three auto DELETEs and two auto ADDs. Maybe.
One auto-ADD is Toshiba, which may have a deal on it. That leaves two to add for sector balance. That could be Nitori (9843 JP) and Zozo (3092 JP).
Friday’s move on Fast Retailing brings in the issue of the new capping function. That would be a different US$2bn selldown. Lots of gory details here.

Anta Sports (2020 HK) Placement: Limited Passive Inflows

Anta Sports Products (2020 HK) has completed a top-up placement of 119m shares at a price of HK$99.18/share, an 8.84% discount to the last close of the stock.
The placement has raised HK$11.8bn (US$1.52bn) and the proceeds will be used for the repayment of loans and for daily operational needs.
There will be small passive inflows in the stock at the close on 20/21 April and some small inflows in August/September.

Alibaba (9988 HK): “Department One” in Reorganization

By Ming Lu

Alibaba broke down Taobao Tmall Center, the most important department, into three departments.
Industry Development Department One is actually “other businesses” after the reorganization.
Following Department One will help investors to understand Alibaba’s financials.

HKBN (1310 HK): China Mobile Is the Latest to Show Interest

Reuters reported that China Mobile (600941 CH) is exploring a potential buyout of HKBN Ltd (1310 HK). The shares surged 12.3% to HK$6.57, above I Squared’s rumoured HK$6.00 offer.
To get an idea of the appropriate offer price, we examine shareholding dealings from substantial shareholders. Our analysis suggests that a scheme offer of around HK$8.50 would likely be required.
PAG is also a rumoured bidder. The flurry of interest around HKBN suggests a good probability that one of the bidders will come through with a formal offer.

Keppel Infrastructure Trust Placement – Very Well Flagged, Should Expect Some Short Covering

By Clarence Chu

Keppel Infrastructure Trust (KIT SP) is looking to raise S$125m (US$96m) in its primary placement.
The proceeds in the deal will be used to partially pay down its bridge loan, the latter used in a series of acquisitions made by the REIT in 2022.
Including the preferential offering, the deal would be a large one to digest at 9.4% of the REIT’s current mcap and 89.3 days of three month ADV.

TSMC: Crowded Trade?

By Steven Holden

Taiwan Semiconductor (TSMC) is by far the most dominant stock holding among active EM investors.
TSMC is owned by 87.5% of EM funds with an average weight of 6.1%, it is also the largest portfolio holding for 64.5% of managers.
Despite high levels of positioning, there are no obvious signs that managers are scaling back positions. The risk of not holding TSMC may be greater than playing the contrarian.

Targeting the Widening of KT Corp ADR Premium Amid MSCI Inclusion

We should expect significant changes in KT’s ADR premium approaching the implementation date as foreign institutions leading the passive flow for MSCI Korea constituents have typically preferred ADRs.
Looking at the previous two occasions, the ADR disparity widened from the midpoint of the review period. And this trend continued for a while after the implementation.
Although KT’s ADR disparity has not yet significantly expanded, we may witness a similar pattern this time as well, given that it has been continuously moving in the premium recently.

YFO Goes Hard for Board Spill – Independents AND Executives

At end-March, Toyo Construction (1890 JP) started playing hardball against YFO. They rejected the EGM call; they sent a letter to METI crying “FEFTA Breach!”, and raised the div BIGLY.
The new div at ¥63/share was meant to get the share price over ¥1,000/share so the YFO bid at that price would not be meaningful. So far, no luck.
But YFO, which had threatened to propose a new slate, came out today with a list of nine, including two who would be executive directors. 👀👀

Yamada Denki (9831) Buyback Almost Done and Odd Dividend “Cut”, and a Lightbulb Dilemma

In May 2022, Yamada Denki (9831 JP) announced a very large buyback. GINORMOUS – in fact – at 23.9% of shares out ex-Treasury if maximum shares were bought.
So far, YDH is 83.5% through, and at the recent pace, they will end it 8 May having bought 183-184mm shares (21.9% of TSO) spending 86.6% of funds allocated.
That’s why the announcement lowering the March 2023 div to ¥12/share vs ¥18/share last year was just weird. And bodes badly. We need a lightbulb moment for a lightbulb dilemma.

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Apr 18

Most Read: Ecopro Co Ltd, Rakuten Bank, Anta Sports Products, Arclands Corporation, Nitori Holdings, Lotte Shopping Co, Genting Bhd, ZJLD Group, Genesis Minerals and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

MSCI May 2023 QCIR: Potential Changes & Things to Watch as Review Period Commences
Rakuten Bank (5838) IPO – Let’s Go! (Part 2)
Anta Sports Placement – A Large Deal to Digest with Unknown Use of Proceeds but Track Record Is Good
Arclands (9842) Overpays for Arclands Service Holdings (3085)
Nikkei 225 Sep 2023 Rebalance Gets Interestinger – Possible Fast Retailing Cap and Zozo Stretch
Aiming for Price Movement Patterns with Low Market Exposure in MSCI Korea May Review
StubWorld: Genting Berhad Is Cheap
ZJLD Group IPO – Sentiment Could See a Positive Shift, Mid-Bottom End Digestible
ZJLD Group IPO: Valuation Insights
Genesis To Acquire St Barbara’s Flagship As Merger Cancelled

MSCI May 2023 QCIR: Potential Changes & Things to Watch as Review Period Commences

The review period for the price cutoff for the MSCI May Quarterly Comprehensive Index Review (QCIR) starts today. MSCI should choose a day from this week to compute market cap.
The most changes (especially adds) are expected in mainland China following an expansion of the universe for inclusion of stocks in Northbound Stock Connect.
There are stocks in India where there will be FIF changes triggering large flows and there are things to watch on some stocks in Korea and China.

Rakuten Bank (5838) IPO – Let’s Go! (Part 2)

SBI Sumishin Net Bank (7163 JP) lowered its listing price vs what were already lowered expectations from a year prior. Then Rakuten Bank (5838 JP) lowered its IPO range.
SBI Sumishin dilly-dallied around IPO price for three days then went nuts, rising 40% as of Friday morning. Rakuten Bank’s IPO looks dirt cheap now.
But it is worthwhile comparing it on a spectrum of OTHER Japanese banks and neobanks.

Anta Sports Placement – A Large Deal to Digest with Unknown Use of Proceeds but Track Record Is Good

Anta Sports Products (2020 HK) aims to raise around US$1.5bn in its top-up placement.
Anta hasn’t specified what it aims to do with the money that it’s looking to raise, furthermore, it’s already net cash.
In this note, we will talk about the placement and run the deal through our ECM framework.

Arclands (9842) Overpays for Arclands Service Holdings (3085)

On Friday Arcland Sakamoto (9842 JP) and restaurant franchise subsidiary Arcland Service (3085 JP), which it launched in 1993 and IPOed in 2007, announced they had agreed to merge.
Arcland SHD runs 18 restaurant brands, of which Katsuya is most well-known, with a total of 750 or so restaurants managed globally. It has grown consistently.
The merger ratio is at an all-time high for Arcland SHD. This should be a done deal but I might expect some complaints. I think Arclands is probably overpaying.

Nikkei 225 Sep 2023 Rebalance Gets Interestinger – Possible Fast Retailing Cap and Zozo Stretch

With 3.5 months left in the dataset, the data is pretty close to settled. The interesting bits are elsewhere. There are three auto DELETEs and two auto ADDs. Maybe.
One auto-ADD is Toshiba, which may have a deal on it. That leaves two to add for sector balance. That could be Nitori (9843 JP) and Zozo (3092 JP).
Friday’s move on Fast Retailing brings in the issue of the new capping function. That would be a different US$2bn selldown. Lots of gory details here.

Aiming for Price Movement Patterns with Low Market Exposure in MSCI Korea May Review

We should aim for price movement patterns with relatively low market exposure. One of them is the post-effective upward price movement of deletions.
The relative price performance for one week after the implementation compared to KOSPI 200 was consistently positive, ranging from 2.41% to 6.82%.
Given the recent price movement of four deletion candidates, there is again a high possibility that the price distortion caused by MSCI flow will revert after the effective date.

StubWorld: Genting Berhad Is Cheap

Genting Bhd (GENT MK)‘s implied stub and the simple ratio (GENT / Genting Singapore (GENS SP)) are at multi-year lows.
Preceding my comments on Genting are the weekly setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

ZJLD Group IPO – Sentiment Could See a Positive Shift, Mid-Bottom End Digestible

By Clarence Chu

ZJLD Group (ZJLD HK) is looking to raise around US$811m in its Hong Kong IPO.
ZJLD Group (ZJLD) is a Chinese liquor company primarily producing baijiu.
In this note, we will look at deal dynamics and share our thoughts on valuation.

ZJLD Group IPO: Valuation Insights

ZJLD Group (ZJLD HK) has launched its HKEx listing at HK$10.78-12.98 per share to raise up to US$811 million. Books are open from 17 to 20 April.
We previously discussed the IPO in ZJLD Group IPO: The Bull Case, ZJLD Group IPO: The Bear Case and ZJLD Group IPO: Valuation First Look.
Our valuation analysis suggests that the IPO price range is attractive. Therefore, we would participate in the IPO.

Genesis To Acquire St Barbara’s Flagship As Merger Cancelled

Gold miner St Barbara Ltd (SBM AU)’s reverse merger with Genesis Minerals (GMD AU) always had a whiff of biting off more than they could chew. That’s now validated.
St Barbara has confirmed it will sell its flagship Leonora gold project to Genesis for $600mn (in cash and GMD scrip). The reverse merger has been cancelled.
Post transaction, St Barbara will hold up to ~19.5%, and be left with no debt and ~$197m in cash. Genesis will emerge with no debt, and ~$175mn cash (pre-transaction costs).

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Apr 17

Most Read: Rakuten Bank, Kotak Mahindra Bank, Tencent, Arcland Sakamoto, Newcrest Mining, Samsung SDI, Lotte Shopping Co and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Major Global Liquidity Warning – Don’t Fight the Feds
Rakuten Bank (5838) IPO – Let’s Go! (Part 2)
Index Rebalance & ETF Flow Recap: HSI, S&P/ASX, KOSDAQ150, TAMSCI, Kotak Mahindra Bank
Last Week in Event SPACE: Tencent, Ecopro, Japan’s Governance, Jardines, Citizen
Arclands (9842) Overpays for Arclands Service Holdings (3085)
Merger Arb Mondays (17 Apr) – Newcrest, Essential, Healius, Lian Beng, Golden Energy, Arcland
Price/Flow Impact on Four Constituent Changes in KODEX Top 5 Plus ETF Rebalancing in June
Aiming for Price Movement Patterns with Low Market Exposure in MSCI Korea May Review
ECM Weekly (16th Apr 2023) – Rakuten Bank, Harita Nickel, Merdeka Battery, ZJLD, Adicon, Supcon
Good Morning Japan| Recession Fears Spook Equities;NUGGET- Musk Jumps in AI Race, Boon for Advantest

Major Global Liquidity Warning – Don’t Fight the Feds

By Michael J. Howell

A major bull market in Global Liquidity has started. Be prepared the cycle is rising and looks set to expand towards a new top sometime around 2026.
A sharp uptick in the pace of liquidity injections into World financial markets occurred around October of last year in the wake of the British gilt crisis
China’s PBoC also began a major easing policy coinciding with the end of COVID-lockdowns. China matters hugely to the World economy because of her whopping size.

Rakuten Bank (5838) IPO – Let’s Go! (Part 2)

SBI Sumishin Net Bank (7163 JP) lowered its listing price vs what were already lowered expectations from a year prior. Then Rakuten Bank (5838 JP) lowered its IPO range.
SBI Sumishin dilly-dallied around IPO price for three days then went nuts, rising 40% as of Friday morning. Rakuten Bank’s IPO looks dirt cheap now.
But it is worthwhile comparing it on a spectrum of OTHER Japanese banks and neobanks.

Index Rebalance & ETF Flow Recap: HSI, S&P/ASX, KOSDAQ150, TAMSCI, Kotak Mahindra Bank

The review period for the MSCI May QCIR starts on Monday. The most ~~changes~~ inclusions by far are expected to be in China.
There will be an ad hoc change for the S&P/ASX 100 Index, S&P/ASX 200 (AS51 INDEX) and KOSDAQ 150 Index (KOSDQ150 INDEX) at the close on 18 April.
After a period of sustained outflows, there were some inflows to the IShares Core MSCI Asia Ex Japan ETF (3010 HK) during the week.

Last Week in Event SPACE: Tencent, Ecopro, Japan’s Governance, Jardines, Citizen

Prosus (PRX NA) moved 96mn shares of Tencent (700 HK) into CCASS. Tencent shares fell hard. If the share price fell because of a block offering, that would be unwarranted.
Ecopro (086520 KS) is up an eye-watering 590% in the past three months, primarily on Ecopro BM (247540 KS)‘s outperformance, together with sentiment towards soon-to-be-listed 52.8% held Ecopro Materials.
Japan’s Finance Minister said that companies need to improve their PBRs, and that “increasing corporate value of listed companies would allow for Japan to realise sustainable growth.”

Arclands (9842) Overpays for Arclands Service Holdings (3085)

On Friday Arcland Sakamoto (9842 JP) and restaurant franchise subsidiary Arcland Service (3085 JP), which it launched in 1993 and IPOed in 2007, announced they had agreed to merge.
Arcland SHD runs 18 restaurant brands, of which Katsuya is most well-known, with a total of 750 or so restaurants managed globally. It has grown consistently.
The merger ratio is at an all-time high for Arcland SHD. This should be a done deal but I might expect some complaints. I think Arclands is probably overpaying.

Merger Arb Mondays (17 Apr) – Newcrest, Essential, Healius, Lian Beng, Golden Energy, Arcland

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads 111 Inc (YI US), Alliance Aviation Services (AQZ AU), Estia Health (EHE AU), United Malt Group Ltd (UMG AU), Aag Energy Holdings (2686 HK), Origin Energy (ORG AU).
Lowest spreads – Healius (HLS AU), Essential Metals (ESS AU), Liontown Resources (LTR AU), Lian Beng (LBG SP), Golden Energy & Resources (GER SP), Mincor Resources NL (MCR AU).

Price/Flow Impact on Four Constituent Changes in KODEX Top 5 Plus ETF Rebalancing in June

Samsung SDI and LG Chem are expected to be newly included in the index, while Hana Financial and KT&G Corporation are predicted to be excluded.
The correlation between the price movement and the flow direction on the rebalancing trading day of constituent changes from the past reviews was quite high.
We can set the price impact expectation for the upcoming review even more aggressively, given that the size of the flow x DTV is more significant than in previous cases.

Aiming for Price Movement Patterns with Low Market Exposure in MSCI Korea May Review

We should aim for price movement patterns with relatively low market exposure. One of them is the post-effective upward price movement of deletions.
The relative price performance for one week after the implementation compared to KOSPI 200 was consistently positive, ranging from 2.41% to 6.82%.
Given the recent price movement of four deletion candidates, there is again a high possibility that the price distortion caused by MSCI flow will revert after the effective date.

ECM Weekly (16th Apr 2023) – Rakuten Bank, Harita Nickel, Merdeka Battery, ZJLD, Adicon, Supcon

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
Momentum appears to be picking up on the IPO front with a few successful listing helping sentiment
On the placement front, GDR flow appears to have resumed.

Good Morning Japan| Recession Fears Spook Equities;NUGGET- Musk Jumps in AI Race, Boon for Advantest

By Mark Chadwick

OVERSEAS. SPX up +0.8%WoW but slipped -0.2% Friday as Hawkish Waller came out amid weak US March Retail Sales data; Musk jump’s into Generative AI; Boeing Production Woes
JAPAN.NKY Futs flat vs Cash USDJPY 133.8; Security Concerns ahead of by-elections as PM Kishida smoke Bombed; Panasonic to build 3rd US batt plant; JT ramps up heated stick products
NUGGET. Elon Musk’s aggressive push into Generative AI to rival/beat ChatGPT; A boon for NDVIDIA and by extension, Japan’s Advantest(6857)

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Apr 16

Most Read: Lasertec Corp, JD Health, Bellevue Gold, Sun Kwang, Citizen Watch, Ecopro BM Co Ltd, Tesla Motors, Tencent, Samsung SDI and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Index Rebalance & ETF Flow Recap: Nikkei225, KOSDAQ150, KT Corp
Hang Seng Index Rebalance Preview: A Year Later Than Planned – 80 Members at Last?
S&P/ASX Adhoc Index Rebalance: SVW in ASX100, BGL in ASX200
Major Global Liquidity Warning – Don’t Fight the Feds
KOSDAQ150 Ad Hoc Index Rebalance: Sun Kwang (003100) To Replace SK Oceanplant (100090)
Citizen Watch (7762) : Super-Aggressive Buyback Likely Ending Soon – Beware of Risks Both Ways
Ecopro BM: Considering on a CB Issuance of 500 Billion Won
Market Share Loss for Tesla Korea Accelerating in 1Q 2023
Last Week in Event SPACE: Tencent, Ecopro, Japan’s Governance, Jardines, Citizen
Price/Flow Impact on Four Constituent Changes in KODEX Top 5 Plus ETF Rebalancing in June

Index Rebalance & ETF Flow Recap: Nikkei225, KOSDAQ150, KT Corp

The March rebalances of the NIFTY indices and the Nikkei 225 (NKY INDEX) were implemented last week. Plus some ad hoc rebalances for the KOSPI2 INDEX and KOSDQ150 INDEX.
A quieter week coming up with multiple market holidays across markets. We also near the start of the review period for the MSCI May QCIR.
There were inflows to Tracker Fund of Hong Kong Ltd (2800 HK) and iShares FTSE/Xinhua A50 China (2823 HK) during the week while there were outflows from some Korea ETFs.

Hang Seng Index Rebalance Preview: A Year Later Than Planned – 80 Members at Last?

With no changes made at the March rebalance, we are still stuck at 76 index constituents. And it’s been a year later than originally planned to reach 80 index constituents.
We list 10 potential inclusions in June. Adding all 10 stocks will lead to around 5% one-way turnover, so there could be a mix of larger and smaller stocks added.
There will be at least 1x ADV to trade on nearly all inclusions. Short interest is over 4% of float on some stocks and there has been a recent jump.

S&P/ASX Adhoc Index Rebalance: SVW in ASX100, BGL in ASX200

Shareholders have approved OZ Minerals Ltd (OZL AU)‘s acquisition by BHP Group Ltd (BHP AU) and OZL is expected to stop trading after the close on 18 April.
OZ Minerals Ltd (OZL AU) will be replaced by Bellevue Gold (BGL AU) in the S&P/ASX 200 (AS51 INDEX) and by Seven Group Holdings (SVW AU) in the S&P/ASX 100.
There has been huge short covering on Seven Group Holdings (SVW AU) and Bellevue Gold (BGL AU) over the last few months.

Major Global Liquidity Warning – Don’t Fight the Feds

By Michael J. Howell

A major bull market in Global Liquidity has started. Be prepared the cycle is rising and looks set to expand towards a new top sometime around 2026.
A sharp uptick in the pace of liquidity injections into World financial markets occurred around October of last year in the wake of the British gilt crisis
China’s PBoC also began a major easing policy coinciding with the end of COVID-lockdowns. China matters hugely to the World economy because of her whopping size.

KOSDAQ150 Ad Hoc Index Rebalance: Sun Kwang (003100) To Replace SK Oceanplant (100090)

Following SK Oceanplant (100090 KS) moving from the KOSDAQ to KOSPI Market, the stock will be deleted from the KOSDAQ 150 Index and replaced with Sun Kwang (003100 KS).
The change will be implemented at the close on 18 April and passive trackers will need to trade over 1x ADV on both stocks.
Sun Kwang (003100 KS) was a high probability index inclusion in June, so this brings forward the inclusion by a couple of months.

Citizen Watch (7762) : Super-Aggressive Buyback Likely Ending Soon – Beware of Risks Both Ways

In mid-February 2023, Citizen Watch (7762 JP) announced another buyback. It had averaged nearly two small buybacks a year for the past four years for a total of ¥10bn.
This new one was ¥40bn, which assuming a 20% share price jump was 12% of ADV for a year. Bigly! We got the 20% jump, then not much more.
But Citizen has been buying fiercely. In the first 25 days of trading they averaged 25.8% of volume and bought back 11.5% of shares out. There’s a story here.

Ecopro BM: Considering on a CB Issuance of 500 Billion Won

According to Hankyung Business Daily, Ecopro BM Co Ltd (247540 KS) is considering on issuing a CB worth 500 billion won to various private equity and asset managment companies.
We would be negative on the potential CB issuance of nearly 500 billion won by Ecopro BM.
The potential issuance of this CB is a signal from the management that it is trying to capitalize on the recent sharp increases in share price to raise more capital.

Market Share Loss for Tesla Korea Accelerating in 1Q 2023

The fact that Tesla Korea is losing its market share significantly in Korea portends increased challenges for Tesla Motors on a global basis.
The number of new Tesla vehicles registered in Korea was 1,303 units in 1Q 2023, down 52% YoY.
In this insight, we provide three major reasons for Tesla’s market share losses in Korea. We also provide Tesla Korea’s 2022 results analysis.

Last Week in Event SPACE: Tencent, Ecopro, Japan’s Governance, Jardines, Citizen

Prosus (PRX NA) moved 96mn shares of Tencent (700 HK) into CCASS. Tencent shares fell hard. If the share price fell because of a block offering, that would be unwarranted.
Ecopro (086520 KS) is up an eye-watering 590% in the past three months, primarily on Ecopro BM (247540 KS)‘s outperformance, together with sentiment towards soon-to-be-listed 52.8% held Ecopro Materials.
Japan’s Finance Minister said that companies need to improve their PBRs, and that “increasing corporate value of listed companies would allow for Japan to realise sustainable growth.”

Price/Flow Impact on Four Constituent Changes in KODEX Top 5 Plus ETF Rebalancing in June

Samsung SDI and LG Chem are expected to be newly included in the index, while Hana Financial and KT&G Corporation are predicted to be excluded.
The correlation between the price movement and the flow direction on the rebalancing trading day of constituent changes from the past reviews was quite high.
We can set the price impact expectation for the upcoming review even more aggressively, given that the size of the flow x DTV is more significant than in previous cases.

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Apr 15

Most Read: Tencent, Bellevue Gold, Global Unichip, Sun Kwang, Citizen Watch, WCP, Jardine Matheson Holdings, Rakuten Bank, Ecopro BM Co Ltd, Pharmaessentia Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Tencent (700 HK) – This Is Not the Selldown You Are Looking For
S&P/ASX Adhoc Index Rebalance: SVW in ASX100, BGL in ASX200
MSCI Taiwan May QCIR: Potential Inclusions to Drive Deletions
KOSDAQ150 Ad Hoc Index Rebalance: Sun Kwang (003100) To Replace SK Oceanplant (100090)
Citizen Watch (7762) : Super-Aggressive Buyback Likely Ending Soon – Beware of Risks Both Ways
A High Conviction Long Short Trade in KODEX Battery ETF Rebalancing in June
Jardine Strategic’s Dissentient Shareholders: The Sensible And Workable Approach
Rakuten Bank (5838 JP) – A Keenly Priced Quality Addition to the Global Neobanks Universe
Ecopro BM: Considering on a CB Issuance of 500 Billion Won
PharmaEssentia GDS Issuance – Strong Revenue Growth and Narrowing Losses

Tencent (700 HK) – This Is Not the Selldown You Are Looking For

On April 11, Prosus (PRX NA) made an Update on Repurchase Programme that it had repurchased shares in the market from the 3-7 April. They do so every week.
This one said they would move 96 million shares of Tencent (700 HK) currently held in non-transferrable shares into CCASS so they could be sold.
The ADRs dropped in New York time. Tencent shares fell hard today. If the share price fell because of a block offering, that would be unwarranted.

S&P/ASX Adhoc Index Rebalance: SVW in ASX100, BGL in ASX200

Shareholders have approved OZ Minerals Ltd (OZL AU)‘s acquisition by BHP Group Ltd (BHP AU) and OZL is expected to stop trading after the close on 18 April.
OZ Minerals Ltd (OZL AU) will be replaced by Bellevue Gold (BGL AU) in the S&P/ASX 200 (AS51 INDEX) and by Seven Group Holdings (SVW AU) in the S&P/ASX 100.
There has been huge short covering on Seven Group Holdings (SVW AU) and Bellevue Gold (BGL AU) over the last few months.

MSCI Taiwan May QCIR: Potential Inclusions to Drive Deletions

Based on closing prices from 12 April, we forecast 2 adds and 2 deletes for the MSCI Taiwan Index at the May QCIR.
Global Unichip (3443 TT) is a high probability index inclusion and that will drive the deletion of Giant Manufacturing (9921 TT) from the index.
Wistron Corp (3231 TT) is a potential inclusion and that could result in the deletion of Win Semiconductors (3105 TT) from the index.

KOSDAQ150 Ad Hoc Index Rebalance: Sun Kwang (003100) To Replace SK Oceanplant (100090)

Following SK Oceanplant (100090 KS) moving from the KOSDAQ to KOSPI Market, the stock will be deleted from the KOSDAQ 150 Index and replaced with Sun Kwang (003100 KS).
The change will be implemented at the close on 18 April and passive trackers will need to trade over 1x ADV on both stocks.
Sun Kwang (003100 KS) was a high probability index inclusion in June, so this brings forward the inclusion by a couple of months.

Citizen Watch (7762) : Super-Aggressive Buyback Likely Ending Soon – Beware of Risks Both Ways

In mid-February 2023, Citizen Watch (7762 JP) announced another buyback. It had averaged nearly two small buybacks a year for the past four years for a total of ¥10bn.
This new one was ¥40bn, which assuming a 20% share price jump was 12% of ADV for a year. Bigly! We got the 20% jump, then not much more.
But Citizen has been buying fiercely. In the first 25 days of trading they averaged 25.8% of volume and bought back 11.5% of shares out. There’s a story here.

A High Conviction Long Short Trade in KODEX Battery ETF Rebalancing in June

WCP will likely be included in the rebalancing of Samsung KODEX Secondary Battery Industry ETF in June. And we should consider the possibility of this happening to be quite high.
We can expect a daily passive inflow of around 0.3x compared to WCP’s typical DTV. The practical correlation with the price should be higher than the theoretical level.
We should consider using SKIET, which engages in the same business in the same sector, as a hedge. WCP/SKIET Long Short achieved considerable performance within the past week’s window.

Jardine Strategic’s Dissentient Shareholders: The Sensible And Workable Approach

Back on the 8 March 2021, Jardine Matheson (JM SP) made a cash acquisition for the 15% of Jardine Strategic (JS SP)‘s share capital it did not already own.
The US$33/share Offer price was arguably light. But with the amalgamation requiring 75% approval and Matheson providing an irrevocable to vote its 84.89% stake for the transaction, it was done.
On the 20 April 2022, the Bermuda Court dismissed Jardine’s application to strike out dissenting shareholders who acquired shares after the Offer was announced. Last month, Jardine lost its appeal.

Rakuten Bank (5838 JP) – A Keenly Priced Quality Addition to the Global Neobanks Universe

By Victor Galliano

Rakuten Bank’s IPO will add an attractively valued Japanese neobank to the globally listed neobank universe; furthermore, the Rakuten Group ecosystem is a powerful tool for customer acquisition and retention
On efficiency metrics, Rakuten Bank scores well versus its key domestic peers as well as global comparables; Rakuten Group companies act as a key conduit for new clients
At the announced issue price of ¥1,400, Rakuten Bank’s PBV ratio implies an attractive 25% discount to its core Japanese peer SBI Sumishin Net Bank, for similar ROE

Ecopro BM: Considering on a CB Issuance of 500 Billion Won